Anaergia (TSX:ANRG) Q2 2026 Earnings Call

0:00 Hello everyone. Thank you for joining us and welcome to the Anaergia Second Quarter twenty twenty six Conference Call and Webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Darlene Webb with Investor Relations. Darlene, please go ahead.

0:32 Thank you very much, operator, and good morning, everyone. On today's call, we'll be discussing Anaergia's earnings for the second quarter of twenty twenty six, which ended 06/30/2026. I am joined this morning by Mr. Asaf Ahn, ANRGEA's Chief Executive Officer Mr. Greg Wolfe, ANRGEA's Chief Financial Officer and Doctor. Yaniv Sherson, Anaergia's Chief Operating Officer.

1:02 Before beginning our formal remarks, we would like to caution listeners regarding forward looking information and note the company's use of non GAAP measures. Listeners are reminded as always that today's discussion may contain forward looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in these forward looking statements. Anaergia does not undertake update any forward looking statements except as may be required by applicable laws. Listeners are urged to view the full discussion of risk factors in the company's prospectus filed with Canadian securities regulators.

1:48 And with that, I will turn the call over to Asaf.

1:53 Thank you, Darlene. Good morning, everyone. It's good to be back here with you. The trajectory I described three months ago continues. Every pillar of the business is delivering. Revenue grew 98% year over year to $63,900,000. Gross profit grew 38% year over year. Adjusted EBITDA was positive for the fourth quarter in a row. Revenue backlog stands at $275,000,000, up from $257,000,000 at year end. I am pleased with these Q2 results. And I'm also as clear on where the work still lies ahead.

2:40 Continuing to convert our revenue backlog into revenue, continuing to ramp our platform assets to their full potential, and continuing to run Anaergia with the operational discipline that defined my approach. Greg will walk you through the financial details shortly. Two development this quarter that stands out. First, our so called biomethane facility began delivering on the California SB fourteen forty utility gas procurement program. We are the first project to deliver gas under that program. Second, we signed a $58,000,000 contract with Eugenix Fuels.

3:25 Eugenix is a joint venture backed by Ameresco and HASI.

3:30 Through their joint venture, two public companies chose our technology for their first project in agricultural RNG. That kind of a choice is not made lightly, and I am proud of what it says about Anaergia. Yaniv will walk you through the full operational picture. The broader environment remains supportive. In our largest markets, government programs continue to drive long term demand for what we do. New partners like Eugenix are choosing us for the first time, and existing partners like Vanguard are choosing us again.

4:16 Now for the part with the actual numbers. Greg, over to you. Thank you, Asaf, and good morning, everyone. Let me take you through our financial results for the three months ended 06/30/2026. Revenue for Q2 twenty twenty six was $63,900,000 an increase of 98.1% or 31,700,000 compared to $32,300,000 in Q2 twenty twenty five. This revenue growth was primarily driven by increased capital sales project execution in Italy and North America. On a year to date basis, revenue increased 109% to 119,100,000 from $57,100,000 in the first half of twenty twenty five, reflecting the sustained ramp up of capital sale execution across both quarters.

5:13 Gross profit for Q2 twenty twenty six was $14,500,000 an increase of 38.2 or $4,000,000 from $10,500,000 in Q2 twenty twenty five. On a year to date basis, gross profit increased 71% to $27,200,000 from $15,900,000 driven by the same capital sales led revenue growth. Gross margin in Q2 was 22.7% and year to date was 22.8%, which is below our expectations mostly due to our Rhode Island bioenergy facility, one of our build own operate assets, which continues to increase its renewable natural gas production at a steady rate. Excluding this asset's approximate 1,800,000 gross margin loss in Q2 twenty twenty six, Our gross margins would have been approximately 2.9 percentage points higher and our adjusted EBITDA would have improved to approximately $3,700,000 Year to date, our gross margin excluding this asset would have also improved by 3.2 percentage points from 22.8% to 26% and adjusted EBITDA would have been higher by $3,800,000 to $6,800,000 year to date.

6:29 Although we see steady operational improvements at the facility, we are exploring other opportunities for this asset given its continued underperformance. SG and A expense for Q2 twenty twenty six were $15,200,000 compared to $14,300,000 in Q2 twenty twenty five. Q2 SG and A reflects higher legal and tax service fees in the period. The tax service fees relate mostly to tax strategy initiatives across the company exploring ways to reduce our overall tax costs as we move forward as a profitable entity. On a year to date basis, SG and A of $29,300,000 was lower by 6.9% or $2,200,000 compared to $31,500,000 in the same period last year.

7:15 We continue to run the business with discipline while supporting our growth initiatives. Turning to the bottom line, net loss for Q2 twenty twenty six was $2,100,000 compared to a net loss of $9,500,000 in Q2 twenty twenty five, an improvement of 78% year over year. On a year to date basis, net loss was $6,500,000 compared to a net loss of $15,400,000 in the same period last year, an improvement of 58%, driven by higher revenue, gross profit expansion and disciplined cost control. Now moving to adjusted EBITDA. Adjusted EBITDA for Q2 twenty twenty six was positive 1,900,000 compared to a loss of 2,200,000 in q two twenty twenty five. That is an improvement of 4,100,000 or 187% year over year.

8:07 On a year a year over year basis adjusted EBITDA was positive 3,000,000 an improvement of 9,200,000 or 149% compared to a loss of 6,200,000 in the same period last year. This reflects the consistency of our positive trajectory across the first half of the year. This is the fourth consecutive quarter of positive adjusted EBITDA and it reflects the consistency we have been building towards. On a trailing twelve month basis, we have achieved adjusted EBITDA of 9,700,000 Turning to revenue backlog. During the second quarter, we signed 66,000,000 in new contract awards in our key markets, including our 58,000,000 contract with NeoGenics fuels and our 8,000,000 contract with Vanguard Renewables.

8:54 Our new contract bookings net of revenue we recognized from revenue backlog during the quarter increased our revenue backlog to 274,900,000 at 06/30/2026. This is an increase of 3.8% from Q1 twenty twenty six and seven point two percent from $256,000,000 at year end 2025. As a reminder, our revenue backlog rule is to include only signed contract work in our capital sales segment as of the reporting date and to count conservatively only three years of long term O and M contracts, even though those contracts are typically five to fifteen years in duration. Beyond our existing revenue backlog, we continue to pursue a large pipeline of capital sales and other opportunities across all key markets.

9:42 During Q2, we secured a $20,000,000 revolving credit line with National Bank of Canada. This new credit facility provides Anaergia with enhanced liquidity and financial flexibility to help support our continued growth plans and project execution. In addition, we have the ability to increase the credit facility another $10,000,000 to $30,000,000 through the accordion feature. This three year credit facility gives us the financial flexibility to continue building our long term growth plans and reflects the market's confidence in our vision to deliver complex infrastructure projects across multiple continents. In summary, Q2 marked another quarter of strong execution and continued financial momentum. Revenue nearly doubled year over year, adjusted EBITDA was positive for the fourth consecutive quarter, revenue backlog continued to expand, and we strengthened our financial flexibility with the new credit facility.

10:38 We are executing with discipline and building further financial strength into every quarter. With that, I'll turn it over to Yaniv. Yaniv?

10:48 Thank you, Greg. Good morning, everyone. I will walk you through the operational picture for Q2 and how our strategy is delivering in the field. Italy remains our largest market and a strong growth engine. Revenue from Italy in Q2 was 29,800,000, a 370% increase over Q2 from 2025, driven by expanded execution across our Italian project portfolio. Demand across the Italian market remains strong, supported by Italy's National Recovery and Resilience Plan, which backs long term RNG incentives and capital subsidies on projects. We are watching policy development closely on the next generation of the NRRP incentive program. We see it as a future growth driver of multi project platform sales. In Spain, execution is underway on previously announced projects with gas and waste companies, Nordegas and PreZero. These anchor projects position us well for future work in Spain's emerging RNG market.

11:44 In North America, major news on the capital sales and asset front propelling the business forward.

11:50 On the capital front, new contracts with strong balance sheet backed customers, NeoGenx and Vanguard Renewables. In May, we entered into a $58,000,000 contract with NeoGenx Fuels. NeoGenx is a joint venture between Ameresco and Hassi Capital. Under this contract, we are supplying anaerobic digestion technology to large scale agricultural facility in Nebraska. Notably, this is the first project in the NeoGenics pipeline. In April, we signed an 8,000,000 contract with Vanguard Renewables for our fourth technology deployment with this customer. The facility is in Minnesota and will process food, beverage, and agricultural waste into renewable natural gas. This repeat supply to Vanguard further validates our technology solutions and execution capability. On the asset front, commencement of RNG supply under SB fourteen forty was the major news.

12:39 In June, Socobal Methane began deliveries of renewable natural gas to Southwest Gas Corporation under California's Senate Bill fourteen forty Biomethane Procurement Program. This is the first project to deliver RNG to a California utility under this program. Notably, the SB fourteen forty offtake structure supports long term profitability of the facility and a major growth engine in the state for additional projects. The Charlotte facility remains idled while we assess the best path forward. The Rhode Island Biong facility continues to operate, producing RNG and is gradually improving while we address technical issues. As Greg noted, although we see steady operational improvements at the facility, we're also exploring other options best for the asset given its continued underperformance.

13:24 Our Mojave and Escondido assets continue to perform operating stable and profitably. This quarter underscores a key trend, sustained capability to execute disciplined quarter over quarter and trajectory of increasingly large integrated technology capital sales. Repeat customers with multi project portfolios across Europe and North America validate our capability to add value and support our expanding business. And in June, our asset platform transitioned into commercial delivery under SB fourteen forty, as our Socobao methane facility became the first project to supply California utility under the largest RNG procurement mandate in North America. Globally, regulatory tailwinds continue to build with long term incentives, driving project investment from our customers, Italy's National Recovery and Resilience Plan, The UK's Green Gas Support Scheme, Canada's Clean Fuel Regulation, and now California's SB fourteen forty.

14:20 Each creates structural multi year demand for this kind of infrastructure that we deliver. Our platform is growing in customer base and contract value consistently.

14:29 With that, I'll turn it back to Asaf. Thank you, Anaergia. Thank you, Greg. At the top of the call, I said the trajectory I described three months ago continues. Our q two results show this. Fourth consecutive quarter of positive adjusted EBITDA. Revenue nearly doubled year over year. Revenue backlog is building.

14:56 First commercial delivery under SB fourteen forty, and customers, both new and returning, are choosing Anaergia. I want to speak briefly to what comes next. We will continue to execute and we will continue to compete for each project. Our technology, our track record, and the way we deliver give us both the strength to compete over the long term and the ability to grow with our markets.

15:28 To our shareholders, thank you for your continued confidence. To our employees across every region, thank you for the work behind these results. And for our partners and our customers, thank you for the trust you continue to place in us every day.

15:49 We have the people, the technology, and the strategy to build on our global leadership. I look forward to updating you next quarter. Operator, we can now open the call for questions.

16:09 We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q and A roster.

16:39 Your first question is from Baltij Sidhu with the National Bank of Canada. Your line is now open. Please go ahead.

16:51 Hey, good morning, everyone, and congratulations on the quarter. I just have a few questions. The first relating to M and A. We're seeing more and more M and A relative to historical periods as it relates to biomethane and biogas facilities. Recently BP is now looking to offload our key energy as well. So I just wanted to get your sense of what are you seeing in the marketplace? Are there rooms to kind of look to add assets at at at favorable cost and and IRRs? And how are you looking at valuation, and and how does that stack up with what you're seeing? Balthas, as you know, that we are always scanning the market, and and we are looking for everything that we have in our markets.

17:38 Many interesting things are happening across the regions. As you know, we are a global company, and we are looking in into many different possibilities. But at the moment, there's nothing to to say more at this point.

17:56 Well, thank you for that. And then just a follow-up on on the recent Australia announcement, that's a new geography for you. Could you just give us a sense of the competitive dynamics in Australia and New Zealand with that regard? And how big of a market could this become? And just as a follow-up to that, are you having other conversations with other parties that that that that could be looking to use the technology in in similar spheres? We entered Australia because we understood the market, and the market is very big. We see Australia as what Europe used to be fifteen years ago. This is the reason that we are there. As you know, it took us less than a year to sign our first contract, and we are seeing

18:45 vast majority of of opportunities that we are, you know, going after at the moment. Fair. And one last one for me is just on RIBF. Could you I believe that we've stated prior that we expect it to be breakeven through the back half of the year and are ramping up to 80% utilization in the second half of the year. It's remaining a drag on margins. Could you just and you need you pointed to a to a few items on on our end here. Could you just help us understand kind of where we stand today and and the pathway towards breakeven and and if through the year end is still a good guide?

19:29 We continue to deal with technical issues at the site and the site is improving year over year. However, at this point, we're unable to give any predictions or guidance as to timeline for breakeven. As mentioned, we're exploring options that are best suited for the asset. It has underperformed, although the performance has been improving year over year. Thanks. And just with the CFR, is the 30% uptick in offtake gas pricing, is that still a good approximation just given the CI score that we have?

19:59 Yeah. That's an order of magnitude correct. And notably though, carbon prices are variable. So the gas price will be shifting based on the credit price at any given time. Very good. Thank you for taking my questions and I'll turn the line.

20:19 Your next question is from Craig Irwin with Roth Capital Partners. Your line is now open. Please go ahead.

20:29 Hey, good morning, guys. It's Andrew on for Craig, and congrats on the really strong quarter. First one for me, congrats on the progress for delivering fuel under SB fourteen forty. Can you kind of talk about how the mandate may drive future demand in California and opportunities for similar projects? Yeah, as mentioned, fourteen forty is the largest and only statewide biomethane program in The United States. It requires the utilities to procure renewable natural gas under long term fixed price offtakes, know financeable revenue certainty type structures and we see opportunity for many more projects. As mentioned, you know we leverage wastewater treatment plants of which there are over 150 in the state

21:25 of California that have existing anaerobic digesters, many of which can be retrofitted to receive organic waste using energy as technology and know how. The procurement program has a 2,030 goal equivalent to about over 50 facilities the size of Sokobar methane. So we see a repeatable financeable program to be developing

21:51 follow on projects like Sokobah methane to fill the fourteen forty program. Again, that's earmarked has gas earmarked specifically for organic waste diverted from landfill, the type of feedstock that our facilities process.

22:06 Understood. Thanks for the color there. And then second for me, you guys had a nice uptick in North America revenue both sequentially and year over year. I was just wondering, are there any kind of projects specifically you'd want to call out that you guys kind of executed well on in the quarter?

22:24 Well, we did quite well across the board. I'd say all of our large projects, major customers that we announced, we hit targets, we delivered financially. As Greg noticed, you know, had not been for the Rhode Island sort of offset, we would have been exceeding our margin targets. Understood. Thanks for the color and I'll hop back in the queue. Your next question is from Alexandra Ricci of Paradigm Capital Inc. Your line is now open. Please go ahead. Good morning, guys, and congratulations on four consecutive quarters now. Clearly, capital light shift is now working.

23:12 Just with capital fair sales now carrying most of the growth, as you kinda see backlog conversion accelerating and then additional capital sales volumes, what's gonna be the constraint on execution, whether it's engineering, project management, working capital, or is it something else? And then maybe just a follow on, kind of at what revenue run rate does that model start to strain?

23:42 Alex, I would say, know, in in general, we don't see a lot of constraints into for us to get to, like, double the revenues here. We're running you know, our our manufacturing is running it around is one shift, we can go to three. Engineering, we continue to add on engineering capacity as needed. Capital, the capital structure that we have now with the new facility is very helpful for our growth plans. So we see a we see a pretty clear path to really quite double double triple from where we're at right now as as we move along. Obviously, every as we get more and more projects online resources we're always looking for the engineering side of things and we obviously third party some of this you know the civil work and that sort of thing so we use several contractor key contractors in market. So that gives us a lot of flexibility to book and execute projects of all sizes.

24:43 Awesome. Thank you. And then just dive into some of the investments in the quarter, looks like you invested about 10,000,000 into two kind of Italian assets. I'm just wondering if you would consider some assets, and if we can expect any further investments into those projects. You know that particular situation there was an opportunity that we had. We technically used some of the margin on projects that we had there to do so. And so we think there's upside in the exit strategy that the owners have there and that's what we did on that particular one. That's not we're not looking for further investment into those. Awesome.

25:30 Yep, thank you. Your next question is from Don Angelo Volpe with Beacon Securities Limited. Your line is now open. Please go ahead. Hey, good morning, guys. Just looking at, I guess, revenue cadence for the second half of the year. Just wondering if you could provide any updates on any large projects that are being completed, if everything is running on schedule and we're still kind of expecting a similar cadence to what we saw similar to last year on the top line. Don Angelo, the the all of our projects are online, and actually some of them are we are doing a little bit exceeding our expectations there.

26:20 So I believe the same. Yeah. It would be as of last year, if not better. Okay. I just meant like similar trajectory to sequential improvements. Okay. And then I guess moving over to the O and M side, that was kind of the only year over year decline. I'm just wondering if this is primarily a function of project timing and kind of when we could expect O and M revenues to kind of return to growth. Yes, it's a timing issue. As I noticed, part of our capital light strategy is derisking our exposure through more cost plus style contracts. And so while you know we benefit from a lower risk profile and follow on recurring revenue from our capital sales, we do see variability on a quarter by quarter basis. But overall, you know, the trajectory of growth remains as our capital sales business continues to grow, so will the O and M as an index to the capital sales business and as well as service. So we are seeing growth in the O and M and service and, you know, maybe offset here by timing on a quarterly basis.

27:35 Okay. Appreciate the color there. Keep up the good work, guys. I'll hop back in the queue. We will leave the line open for one more moment for any questions. Okay, thank you so much. I will now pass the call back to Darlene Webb for closing remarks. Darlene, please go ahead. Thank you, operator, and as always, we thank everyone for joining us on this call today.

28:21 For additional information or should you have any questions, please contact the IR team at iranergia dot com or visit us online at anergia dot com. Thank you again for all your time today. Operator, you may now end the call. This concludes today's call. Thank you so much for attending. You may now disconnect.